Class-Action Accuses G.M. of Neglect | News | HMG LLP

Class-Action Case Accuses G.M. of Neglect Beyond Ignition Switch

August 31, 2017

Source: The New York Times by Hilary Stout

Lawyers in sweeping class-action litigation against General Motors have significantly broadened their case against the embattled automaker, claiming that the company disregarded and concealed safety issues far beyond the defective ignition switch that is now linked to 27 deaths.

In a strongly worded complaint, filed late Tuesday in Federal District Court in Manhattan, the lawyers contend that the “new G.M.†that emerged from bankruptcy in 2009 so valued cost-cutting that it “produced an inordinate number of vehicles with serious safety defects,†which it has sought to remedy only this year with the recall of about 27 million vehicles in the United States.

The 700-page filing serves as a “master complaint†for a consolidation of 68 cases seeking class-action status that have been brought around the country on behalf of owners of newer-model G.M. cars seeking compensation for the lost value of their vehicles in light of the safety issues.

It is the latest volley in a complex game of legal maneuvering, centering on the ignition switch defect, that could continue for years.

Crashed car, damaged hood

[G.M. Recalls:  Crisis in Auto Safety - The New York Times has exposed missteps and delays by automakers and federal safety regulators in responding to deadly defects in automobiles during what has become a record year for recalls — more than 48 million in the United States alone through September.  Click HERE for New York Times Interactive feature.]

While the complaint offered little new evidence of a vast cover-up, it heightened an already bitter confrontation — even suggesting that the company’s chief executive, Mary T. Barra, knew about one of the safety problems in a previous job.

“The array of concealed defects is astounding,†the plaintiffs’ lawyers wrote in the complaint. They added: “The defects affected virtually every safety system in G.M.-branded vehicles, including but by no means limited to the air bags, seatbelts, brakes, brake lights, electronic stability control, windshield wipers, sensing and diagnostic modules, and warning chimes.â€

In an emailed statement, G.M. said that it “intends to vigorously defend against plaintiff’s claims that G.M. vehicles have reduced resale value.â€

The complaint was made as part of so-called multidistrict litigation that is being overseen by Judge Jesse M. Furman, and was submitted by the three lawyers whom Judge Furman has appointed to serve as the lead lawyers for all plaintiffs — Steve W. Berman, Elizabeth J. Cabraser and Robert C. Hilliard.

It drew much of its damaging material from the report prepared by the former United States attorney Anton R. Valukas for G.M.’s board and senior management. That report was sharply critical of G.M.’s culture and described instances in which the company’s engineers, product developers and legal department overlooked or failed to act on safety concerns.

Based on documents and communications with the federal safety regulators, the complaint cited a number of cases in which it contended that recalls for a documented safety problem were limited or late, or warranty claims were ignored — as with recalls for axle shafts that could break and a defect in a shift cable that could cause cars to roll out of park and crash.

The complaint used a previously disclosed email to Ms. Barra to suggest the company’s knowledge of safety problems stretched to the highest levels. “New G.M.’s claims that the defects were known only to lower-level engineers is false. For example, current C.E.O. Mary Barra, while head of product development, was informed in 2011 of a safety defect in the electronic power steering of several models. Despite 4,800 consumer complaints and more than 30,000 warranty repairs, G.M. waited until 2014 to disclose this defect,†the complaint read.

That passage apparently referred to a 2011 email that was made public during a congressional investigation of the ignition switch issue, informing Ms. Barra of power steering problems in Saturn Ions similar to a defect in other cars that had been recalled in 2010.

The complaint also displayed many examples of advertisements in which the company emphasized its attention to safety and suggested that it had misled consumers in doing so.

GM CEO Mary Barra speaking at a podium

[The complaint suggested that G.M.’s chief executive, Mary Barra, knew about one of the safety problems in a previous job. Credit Carlos Osorio/Associated Press]

Citing a filing the company made to the Securities and Exchange Commission in 2010, the complaint said that “New G.M. admitted that ‘Product recalls can harm our reputation and cause us to lose customers, particularly if those recalls cause consumers to question the safety or reliability of our products. Any costs incurred or lost sales caused by future product recalls could materially adversely affect our business.’ â€

The complaint covers only economic loss cases that involve cars bought or leased after July 10, 2009, the day G.M. emerged from bankruptcy. The bankruptcy distinction is significant because the company’s restructuring agreement protects it from liability claims that stem from incidents before that date.

G.M. has asked Judge Robert E. Gerber, who presided over the bankruptcy proceedings, to uphold that provision and order the pre-bankruptcy cases dismissed.

Judge Gerber has not yet ruled, partly because he is reviewing whether G.M. committed fraud during the bankruptcy proceedings by not disclosing potential liabilities from the ignition defect. The company has acknowledged that some of its engineers were aware of the problem for more than a decade before the recalls began. The defect can cause unexpected stalling in moving cars and the sudden loss of power can disable the air bags and other safety systems like power steering and power brakes.

While Judge Gerber deliberates, lawyers are pushing ahead with the pre-bankruptcy class actions for economic loss, and they submitted a master complaint for those cases to Judge Furman on Tuesday as well. That complaint focused only on the faulty ignition switch.

At the same time, lawyers are pressing ahead with another type of litigation, also before Judge Furman, as part of the multidistrict consolidation effort — cases involving personal injury and wrongful deaths.

Against objections from G.M.’s lawyers, Judge Furman recently approved the beginning of discovery in post-bankruptcy cases and to date, G.M. has turned over more than four million pages of documents, lawyers said.

“We continue to push G.M. to provide substantive discovery that will allow us to figure out entirely who is responsible and how long they covered the problem up,†Mr. Hilliard, one of the three lead lawyers, said in an interview.

In its statement, G.M. noted that the cases had yet to receive official class-action status.

“The court has not determined whether it is appropriate to treat these matters as class actions and G.M. intends to vigorously defend gainst plaintiff’s claims that G.M. vehicles have reduced resale value,†it said.

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